The dollar pulled off earlier lows yesterday in the wake of comments from a US Federal Reserve official, keeping commodity prices under pressure while global equity markets were little changed.
A typically dovish US central banker, Boston Fed President Eric Rosengren, said it was “surprising” that futures markets currently imply one or zero rate hikes this year, a prediction he said could prove “too pessimistic”.
That moved the dollar up to a session high of 94.829 against a basket of major currencies. The greenback was last down slightly at 94.554.
Investors have been trying to reconcile conflicting statements from US Federal Reserve officials in recent weeks since the central bank issues its policy statement on March 16.
Federal Reserve Chair Janet Yellen said last week the central bank would proceed cautiously in raising rates, in contrast to more hawkish comments from other Fed officials. The apparent lack of unison has left investors uncertain in an environment of mixed economic data.
“The Fed really for the first time has been sending kind of mixed signals about the pace of raising rates,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey. “If the economy is good enough for them to raise rates that could be a good move for stocks, if they are just raising rates in anticipation of the economy picking up and it never does that is a pretty negative sign.”
New orders for US factory goods fell in February and business spending on capital goods was much weaker than initially thought, the latest indications that economic growth remained sluggish in the first quarter.
The Dow Jones industrial average fell 31.81 points, or 0.18 per cent, to 17,760.94, the S&P 500 lost 5.5 points, or 0.27 per cent, to 2,067.28 and the Nasdaq Composite dropped 20.35 points, or 0.41 per cent, to 4,894.19.
MSCI’s index of world shares, edged up 0.09 per cent, buyoed by gains in European stocks.
The pan-European FTSEurofirst 300 share index rose 0.47 per cent, led higher by defensive stocks such as utilities and healthcare.
The move in the dollar kept pressure on oil, with Brent crude, down 0.7 per cent at $38.41, although it recovered after dropping to $38.18, its lowest since March 4. US crude was off 0.4 per cent at $36.65.
Prices have fallen from above $100 a barrel since mid-2014 on a supply glut, bottoming at $27.10 in late January. Brent topped $42.50 last month in anticipation of agreement among producers to freeze output.
Copper prices, which are also sensitive to the value of the dollar, hit a one-month low of $4,757.50 a tonne on concern about Chinese demand and was last down 1.5 per cent at $4,761.
Gold fell for the second successive day, dropping about 0.3 per cent to $1,218.40 an ounce.
Benchmark US 10-year notes were last up 5/32 in price to yield 1.774 per cent, down from 1.791 per cent Wednesday.